OMB: Nonstandard isn’t OK

A new memo brings the government a step closer to having uniform financial standards

Get ready to standardize

The majority of work needed for modernizing the federal government’s financial management operations involves people making changes in processes. Agencies that aren’t ready to modernize their financial systems should begin learning about the new standards and processes that the Office of Management and Budget wants agencies to adopt, said Brad Gladstone, senior executive in public service finance and performance management at Accenture.

However, eventually agencies must upgrade their financial management systems software. “It’s hard to change [processes] unless the system can allow that change,” Gladstone said. “If I’m on an old system, even if I want to change, the system is so inflexible it won’t let me.”

— Mary Mosquera

The good old days when agencies could set up their financial systems and accounting processes to suit themselves are over. A new memo from the Office of Management and Budget defines new business standards and processes that agencies must incorporate into their existing core financial systems.

Those requirements include governmentwide accounting codes.

“This policy is different from today’s practices that allow agencies and shared service providers to…create different processes across the federal government,” said Danny Werfel, OMB’s acting controller.

Financial experts agree that common business processes are necessary for achieving the goals of OMB’s Financial Management Line of Business.

A new testing regimen will help agencies implement the common standards.

In 2009, OMB and the Federal Systems Integration Office will update their testing methods and test scenarios to ensure that financial software complies with the new business standards. Providers of financial management systems will be expected to integrate the standards into their software to prepare for those tests.

The government pays a high cost for the lack of uniformity in financial management systems, experts say. Agencies acquired financial software from different vendors, and they configured the software a nearly infinite number of ways, said Brad Gladstone, senior executive in public service finance and performance management at Accenture.

“What OMB is trying to do is define standards so there aren’t 100 different options for how to process an accounts payable invoice,” he said.

A large portion of the cost of implementing large financial systems is incurred while agencies try to select the business process they want to use; for example, for invoices and requisitions. Uniform standards eliminate many of those time-consuming decisions. “Anything that takes less time takes less money,” Gladstone said.

Another benefit of having uniform financial standards and processes governmentwide is the ability to easily transfer, aggregate and compare financial information, officials said.

For example, many agencies perform work for other agencies, bill them for services and collect payments.

Common business standards and accounting processes also are critical components of preparations for moving to new financial management systems, federal financial managers say.

Eliminating nonstandard elements in financial management solves many problems.

Standard written procedures used governmentwide lower the risk of processing transactions incorrectly, said Bill McCabe, chief financial officer at the Nuclear Regulatory Commission and chairman of the Chief Financial Officer Council’s Financial Management Transformation team. “You have better quality data, and it reduces the cost of oversight and processing transactions.”

Also, when an agency performs payroll work for another agency, slight variations complicate matters. The provider agency typically has a slightly different process for how to send data and accumulate data and different accounting codes, McCabe said.

“It’s causing shared-service providers difficulties because they may service many agencies, and they all do things slightly differently.”

The Federal Systems Integration Office plans to incorporate the OMB standards into its software certification procedures.

After it certifies that particular software meets core financial systems requirements, agencies will be restricted to using only certified configurations of that software.

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